Crude oil bullishness trumps weather

This week we may have had the most favorable planting progress yet in
2008, with an open planting window for virtually all of the Corn Belt and
US.

That had the potential to weaken corn and soybean prices, but instead
this week both are higher. Even wheat, which has some good rains forecast
for western areas, has rallied substantially this week. HRS wheat
planting has moved ahead of normal, and many other crops planting progress
is quickly catching up or surpassing normal this week.

But the market is saying "Who cares?" With crude oil running to new highs
almost daily, does it matter about grain fundamentals? More and more
people are talking about $150-$200 crude oil, so if it goes there,
virtually everything will need to go higher eventually. Regardless of
grain fundamentals, surging crude oil will drive the cost of everything
much higher and provide even more incentive to produce ethanol from nearly
everything (corn, barley, grass, wood, etc). At $200 crude, it won't
matter what gov't policy is - corn will be worth $8 for energy! So while
crude oil surges higher, it might be fruitless to spend too much time
contemplating yield impacting weather. Inflation of all commodities might
dominate the show, and until crude oil actually tops, its possible that
all commodities will continue to inflate.

Perhaps grain fundamentals and weather will just determine when prices go
higher and how much, not whether they will (given surging crude oil).
That seems to be what the market is telling us today. In fact, the 2009
and 2010 crop prices are surging higher, with Dec09 and Dec10 corn futures
surging to new highs while 2008 corn lags 25c below previous highs. This
is saying something about the impact of surging oil prices on corn prices
down the road. Nearby corn futures are languishing due to much improved
planting conditions the past two weeks. Most of the corn will get planted,
it appears, based on today's weather forecast.

But does it matter? We are hearing experts like T. Boone Pickens warning
about $150-$200 crude, and CNBC recently has crooned about the crude oil
market potential, throwing around the $200/barrel mark like coffee at a
Starbucks. There is no question that commodities are all following
energies, as we saw crude oil surge from $30 to $85 before grains moved a
smidgen. Since then grains surged higher, but crude stayed relatively
constant between $70-$95/barrel while grain surged higher.

But since March 4 when soybean prices peaked at $14.66 Nov08, crude oil
prices have risen from $99.83 to $132+ levels, and soybeans are lower!

Wheat prices peaked at $13.20 Mnpls Sept08 on Feb 26, $12.72 CBOT July,
and $13 KC July on March 12-13.

Corn was trading $5.90 Dec08 at the time.
So crude is up 33% while most grains (wheat/soybeans) are lower, and in
wheat's case, sharply lower! Corn is up fractionally with a severe
weather planting delay, but in reality, grains have done virtually nothing
collectively while crude blew 33% higher.